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CoinEx|Essential Knowledge for Newbies When Trading Linear Contracts: Estimated Cost

2022-03-09 07:09:35

As Russia launched military operations in Ukraine on February 24, Bitcoin fell below $35,000 for the first time since July 2021, a drop of over 7%. Though the BTC price plummeted, investors engaged in short trades of linear contracts earned huge profits. Green with envy, many new crypto investors also plan to enter the market. Linear contracts promise steady values even in a bear market because they are priced in USDT, which is a stablecoin. As such, these contracts are very popular when the market is sluggish. For example, the current drops in the BTC price allow traders to short Bitcoin for profits through linear contracts. Thanks to such a flexible long/short model, these contracts have always remained one of the most popular investment products in the crypto market.

Although plenty of beginners plan to follow the trend and trade linear contracts, many of them have no idea about the position amount they could open and how much it will cost. Since rushing into a deal is obviously too risky, let’s first go through the estimated cost.

The estimated cost, including Estimated Cost, Estimated Initial Margin, Estimated Openable, refers to the relevant data of contract trading that you should know before opening a position. As the level of risk tolerance differs from person to person, beginners should first determine the acceptable cost of opening a position and find out about the estimated cost in contract trading. Instead of following suit, you should control the cost based on your own assessment before starting to trade linear contracts.

As we all know, in contract trading, the cost of opening a position is called margin. After the leverage ratio is determined, you can then calculate the Initial Margin, Estimated Cost, and Estimated Openable.

Let’s check the linear contract trading page on CoinEx. After entering the leverage ratio, price, and amount, the Estimated Cost will be generated, as shown in the picture below: 

When the leverage ratio is expanded from 5x to 10x, you will find that the Estimated Cost becomes smaller (see the below picture), which means that the leverage ratio and the Estimated Cost are negatively correlated.

When the leverage ratio remains the same, the Estimated Cost went up as the amount is increased from 0.1 to 0.2. Therefore, the amount is positively correlated with the Estimated Cost.

Estimated Opening Transaction Fee is positively correlated with the Futures Taker Fees and the Estimated Cost. In other words, the lower the Futures Taker Fees, the smaller the Estimated Cost.

According to the above picture, we can see that Futures Taker Fees are placed into different levels on CoinEx. The higher the VIP Level, the lower the Fees. Here, the VIP Level is based on the CET holding in your account. On CoinEx, holding CET reduces the fees involved in each contract trade, which is a great way to reduce the Estimated Cost.

Apart from the Estimated Cost, you should also learn about the “Estimated Openable”, which indicates the position amount you can buy with your Available Balance. Since Estimated Openable = Available Balance/Estimated Cost * Amount, when the Available Balance remains the same, the lower the Estimated Cost, the higher the Estimated Openable.

If you find the above formula too complicated, we recommend relying on CoinEx’s automatic estimations on the linear contract trading page (https://www.coinex.com/perpetual), as shown in the above picture. On this page, you can choose to buy/sell at a certain leverage ratio and enter the amount and price of opening the position. CoinEx will then calculate the Estimated and Estimated Openable for you. Such simple, convenient operations are very friendly to beginners.

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